Thinking of taking out a personal loan or a revolving loan but you don’t know which one to choose? Here are some helpful tips.
Personal loan or revolving loan: the project
Whatever credit you wish to take out, it is above all the project that will allow you to move towards suitable financing. A personal loan will be used to finance all types of short-term needs, such as the purchase of a car, the purchase of household equipment or other. That said, the revolving loan will make it possible to finance these projects in the short term also but will be recharged thereafter to cover other projects, an effective solution but which must be well used.
It is therefore essential at first to know if the need is immediate and if it will be necessary to use another loan in the months to come because rather than to accumulate two loans, as much to take only one which is recharged. Otherwise, a personal loan is perfectly suited for a single financial need.
Advantages and limits of personal loans
The personal loan was designed to meet a household cash flow need, it is easy to obtain, with simplified procedures and advantageous conditions. The durations are relatively short, between 12 and 72 months with rates below 5%. The limit being in certain cases the need to justify the credit on larger amounts, the cost of insurance often not put forward and the increase in a more significant way of the household debt ratio.
Advantages and limits of the revolving loan
The revolving loan was created to meet specific needs, linked to household consumption patterns. Most of the time, they are payment solutions in several installments offered without charge by large brands, they avoid having to take out large sums of money at once and can smooth the reimbursement over several months. That said, the revolving loan is a reserve, usable several times but recharged automatically. The big drawback being the rates charged, often close to 20%, but the sums are adapted to the needs of the household and the borrower is not forced to take out a new loan.
So, personal loan or revolving loan?
It must be borne in mind that the revolving loan is involved in 80% of the debt overindebtedness files, so it is a credit not to accumulate and the personal loan offers larger amounts therefore a more increased chance of encountering financial difficulties by the after. It is said that it is better to opt for the personal loan as long as the credit is not misused.
If the borrower has several loans and he hesitates between the personal loan and the revolving loan, he can completely think about the grouping of credits allowing to collect all the credits in one, to reduce the monthly payments and to include in the passage an amount allocated to a new project. It is a way to effectively restructure and continue to carry out your projects.